Governor Kasich says none will be spent

COLUMBUS — A state savings account that two years ago held less than $1 now has $482 million after Gov. John Kasich's administration banked a $235.1 million budget surplus created by stronger-than-expected tax collections and lower-than-expected spending.

The Republican governor, however, warned against spending any of the surplus and hinted that more tax cuts could be in the offing, even as he worried aloud about what the just-upheld federal health-care law could do to the state's books.

"We are not going back to yesterday," Mr. Kasich said Tuesday. "We are not going to spend this money. … That's how we got into this trouble."

Even with the largess, the state's rainy-day fund reserves remain at about a third of the nearly $1.4 billion target suggested in state law, 5 percent of the state's general fund budget.

After taking outstanding bills into consideration and holding some of that as a cushion going into the just-begun fiscal year, the state had $235.1 million left for its piggy bank.

"I have great concern about the headwinds caused by the Supreme Court [health-care] ruling," Mr. Kasich said, referring to an estimated $950 million during the next two years that could be added to the state's Medicaid costs.

That cost is for people who, for a variety of reasons, have not enrolled in the federal-state health insurance program of last resort even though they are already eligible to do so. Many of those people are now expected to be driven to enroll as they face the federal mandate that they acquire coverage by 2014.

This is before any expansion of Medicaid income eligibility under the federal law. Mr. Kasich, like several other Republican governors, is considering opting out of the Medicaid expansion, despite the fact that the federal government has promised to pick up most, if not all, of the costs.

"I've heard a lot of promises from the federal government," said Mr. Kasich, a former congressman. "I used to work there, remember?"

Rep. Matt Szollosi of Oregon, the No. 2 Democrat in the Ohio House, said some of the surplus funds should have been used to offset cuts that K-12 schools are suffering in the two-year budget that just passed its halfway point.

"I don't believe that shifting more of the burden onto the backs of property taxpayers is the right course," he said. "I disagree with the governor that a state income-tax cut, which would disproportionately benefit the wealthy, is a good use of scarce state resources.

"I would prefer to see the money invested in public schools so that our children have every chance to achieve academic excellence," Mr. Szollosi said.

The state finished with a healthy surplus, despite $500 million that had been expected last fiscal year from JobsOhio, the state's new private economic development corporation, being delayed by litigation. The state is turning future profits from its wholesale liquor business over to JobsOhio to help finance its job-creation mission in exchange for an up-front sum of $1.4 billion, $500 million of which was to go to the state's general fund.

With the lawsuit challenging that arrangement recently dismissed, that $500 million check is now expected to arrive during the current fiscal year, for which it was not budgeted. Yet neither Mr. Kasich nor his budget director, Tim Keen, was willing to look at that as an expected $500 million surplus.

"We're not counting on JobsOhio until it happens," Mr. Kasich said. "There's a lot of space between the lip and the cup. We're not in a position to think we have $500 million. Don't spend the money until you have it."